The Court of Appeal has upheld a recent High Court decision that suggested that the Land Registration Act 2002 made substantive changes to the law. The decision confirms that the 2002 Act is based upon a new set of principles that take no account of the common law rule that no one is able to bestow a better title to an asset than his own.
The new rules stem from the application of section 58 of the 2002 Act. This provides that registration vests the legal estate in the registered proprietor, even though that estate would not otherwise have become vested in him. The provision gives effect to the principle that the 2002 Act confers “title by registration”. Consequently, a registered proprietor’s title depends upon the fact of registration and not upon the validity of any dispositions preceding the registration.
The decision in Barclays Bank plc v Guy [2008] EWCA Civ 452; [2008] 15 EG 173 (CS) concerned the effect of a transfer, the validity of which was in doubt: for further details, see PP 2008/35. The Court of Appeal assumed, without deciding the point, that the transfer was void. It accepted that the transferee’s title was, as a result, liable to correction because the transfer had had no dispositive effect.
However, the transferee had been the registered proprietor when it charged the property to the bank, and section 23 of the 2002 Act provides that, once registered, a registered proprietor has all the powers of an owner to dispose of the estate. Under the 2002 Act, the registration of the legal charge could not be retrospectively undone, even though the previous proprietor was entitled to have its name restored to the register because the transfer registered by the Land Registry was a nullity. Consequently, the bank was entitled to sell the property as mortgagee and to vest the property in a purchaser free from any interest or claims by the previous proprietor of the land.
The Court of Appeal decision confirms that victims of forged transactions are not necessarily entitled to be restored to their previous position (although they may be entitled to compensation from the registry for any changes to the register that cannot be undone). The 2002 Act protects innocent third parties that have acquired an interest in land in reliance upon the title shown on the register.
The outcome would have been different if the land had been unregistered. In that case, the title of the transferee and its mortgagee would have depended on the common law rule that no one is able to bestow a better title to an asset than his own.
The case supports the registry’s claims that the 2002 Act has made fundamental changes to our law. It confers title by registration and, once registered, title is guaranteed. Consequently, prospective buyers and lenders need only to consult the register to identify the registered proprietor and need not look behind the register, except to investigate whether any overriding interests might affect them.
Allyson Colby is property law consultant